There are many different types of real estate development projects. To name some of them we have brownfield, greenfield, sub-division, industrial, residential, commercial, hospitality, retail and repositioning and redevelopment.
In Shanghai, we converted a 50 year old prosthetics factory, turned post office, into URBN boutique hotel. The end product was something special, amazing and one of my greatest achievements to date, but getting there was super super tough. Here are some images of a project. This building was a complete dump when we took it over, all the windows were broken, walls were missing, elevator had been ransacked, graffiti on the walls, rats living everywhere, it smelt horrible etc, you get the picture.
Repositioning and redevelopment projects can offer many advantages that new developments do not. Every project is different, but here are some of the positive aspects of using an existing structure and developing it into something new and better.
- Existing building can save money on your construction costs
- Can be much faster to renovate/develop
- Can have heritage and historical value and elements
- Larger floor plates
- Unique features and story
- Community value add
- Generate income/taxes in idle buildings
- Generate jobs
- Increase land values of surrounding real estate
- Increased sales price /sqm
- Government support
Now, with the yin comes the yang. So there are also many challenges that can arise when redeveloping an existing structure including but not limited to:
- Approvals can be onerous and time consuming
- Structural upgrading can be very expensive
- Some areas of the building may not be useable under desired floor plans
- May need to add many elements to meet today’s building regulations which are much more strict than they were decades ago
- Piping for heating/cooling/sewage can be very expensive to make work, both internally and also externally
- Access/Entrance may conflict with new business model for the site
- Push back from neighbours complaints causing delays, and they can complain about pretty much anything
Some of the challenges we faced along the way included:
- Getting government approvals for zoning of the building to be changed from industrial to commercial, which took a lot of wining, dining and smoking. I actually gave up smoking “full time”after that project, too many dinners where you were expected to smoke an entire package over the course of 1 meal. I even started buying cigars so I could deny the cigarettes that are literally thrown at you by every official at the table.
- The entire building was leaning 9 degrees to the west, so we had to dig down alongside the existing columns and foundations and help “pull” the building back level, delays, delays, delays
- We wanted approvals for a rooftop bar which had loading restrictions and other issues because amongst other things, our landlord had added an extra roof level to the original building (without telling anyone) and that roof height was also below what was permitted, that was a fun exercise.
- We needed an extra staircase for fire safety and the list went on and on…
- One case that sits clearly in my mind, is that the neighbours next door managed to shut down our fountain system in the hotel garden, as it apparently made them wet the bed at night due to the sound of running water. In China, anything is possible
So there are a few important considerations when investing into a redevelopment project that you should consider, apart from the obvious location, developer background, economic climate etc.
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